Subjects: Economy, GST, budget, Kosovo refugees,
East Timor, heroin injection room, heroin trials, food prices, LPG
prices, industrial relations
E&OE....................................................................................................
MITCHELL:
Mr John Howard, good morning.
PRIME MINISTER:
Hello, Neil.
MITCHELL:
Mr Howard, the economy are we in for a boom?
PRIME MINISTER:
Well, it's going very strongly, much better than anybody expected
a year ago. I think we may, in fact, have reached a stage where because
of a lot of reforms that have been undertaken our economy is fundamentally
that much stronger that we can look forward to maintaining high levels
of growth for longer periods of time. Now, I don't want to sound
complacent or triumphal, I'm neither, but I'm gratified
because what this means is that ordinary Australians have got more
money in their pockets. They've got lower interest rates. They've
got higher real wages. They've got a higher standard of living.
And they're showing it with their retail spending. You can't
underestimate the impact of that cut in housing rates. It's worth
about $320 a month.
MITCHELL:
Okay, well is inflation at risk now down the track? I see Alan Greenspan,
the US Federal Reserve Chairman, today is being a bit edgy about the
possibility of inflation.
PRIME MINISTER:
One of the difficulties, if I can put it like this, of a boom economy
like this is that people tend to micro-analyse the nuances in every
single remark that anybody makes. You can never relax. And you have
to keep your sights firmly fixed on things like inflation but at the
moment in Australia it's very low and there's no sign of
it breaking out at all in the near term. That's, I guess, all
I can say. The other point I'd make is that now is precisely
the time to press ahead with more reform. And some people will say,
we're doing so well, why both with any other reform.'
You've got to remember that we're doing well now because
of past reforms.
MITCHELL:
What sort of reform are you talking about, industrial relations?
PRIME MINISTER:
I'm talking about taxation reform. I'm talking about industrial
relations reform - those two in particular. Now is the best occasion
in generations for this country to reform its taxation system because
inflation is low, the economy is strong, we can therefore absorb at
the adjustment process very easily and we'll get the benefits
of that reform very quickly.
MITCHELL:
It's a fair argument if things are booming along like
this, why fiddle with it...?
PRIME MINISTER:
But you've got to ask the next question why are they booming?
They're booming because of past reforms, therefore if you want
to maintain the boom, if I can put it that way, you've got to
have further reform. If you don't maintain the boom, if you sit
back and say, oh well, she'll be right mate,' it'll
run out of puff. Now, it is because of us getting the budget in surplus,
it's because of past industrial relations reform and earlier
reforms than that. All of those things have come together and given
us this much stronger economic outlook. Now, that tells us that if
we want to keep the process going we can't let up on reform.
And those who say, no more reform is needed, let's put
the reform activity to one side and enjoy it,' they couldn't
be more short-sighted.
MITCHELL:
But such a dramatic change as the GST, I mean, there has to be an
element of risk in that, does there not?
PRIME MINISTER:
Well, I think there's a risk if you don't. Because the present
system is so discredited and the present system is so out-of-date
and the present system is so much more uncompetitive than the system
that we are proposing that there is a risk, as the old saying has
it, in doing nothing.
MITCHELL:
The Treasurer seems to be suggesting a risk of overheating which I
assume means that, well, interest rates aren't going down, if
anything they'd go up.
PRIME MINISTER:
Well, he wasn't saying that.
MITCHELL:
Well, he's saying that he can't afford GST...
PRIME MINISTER:
I didn't hear him say anything about interest rates.
MITCHELL:
No, that's my interpretation. That's my interpretation.
Well, he doesn't now, I know, but that's my interpretation.
He's saying that the GST package can't be made any sweeter
because it could overheat the economy. Now, if the economy is that
fragile that it can be overheated we're not going to put interest
rates down, are we?
PRIME MINISTER:
Well, I'm not going to get drawn on a comment on interest rates
except, historically, to say they are lower now than they've
been for 30 years and every homebuyer's more than $300 a month
better off as a result. Beyond that I'm not going to speculate
about the future level. You try and produce policies that provide
a benign climate for interest rates but as to future movements, I'm
not going to speculate. What Peter was saying, what I'd say and
anybody in our positions would say, and that is that, yes, we do have
a surplus but you don't squander hard accumulated gains.
MITCHELL:
Well, how would you squander them, I mean, how are we in danger of
squandering them?
PRIME MINISTER:
No, I'm not saying we are but Peter was making the point, as
I understand it, that you need, I mean, there are the fact
that you've done well is, through prudence and care, is a reason
why you should continue to exercise prudence and care into the future.
That's what he's saying.
MITCHELL:
Was that a reason why there can't be any further compensation
in the GST package because it would overheat the economy?
PRIME MINISTER:
Well, I'm not going to comment about that.
MITCHELL:
Well, that's what Peter Costello's saying.
PRIME MINISTER:
Well, I don't think he's quite saying that. But, look, I'm
not going to comment about that. I mean, good try, Neil, but I'm
not.
MITCHELL:
Well, no, but can I just as you specifically...
PRIME MINISTER:
You can ask me anything you like.
MITCHELL:
Do you agree there's a possibility that if there is further compensation
in the GST package it would overheat the economy?
PRIME MINISTER:
I agree that any government has to exercise prudence and care with
a hard... accumulated budget surplus.
MITCHELL:
With respect, Mr Howard, that doesn't answer the question.
PRIME MINISTER:
Well, I know it's not quite the answer you're perhaps seeking
but our position on the GST is we want to get it through. We're
not going to alter its essential thrust. We've always said that
we would agree to some fine-tuning of it and I've never sought
to define what that fine-tuning would be, nor has the Treasurer, and
I don't intend to do that now.
MITCHELL:
All right. So there's still room for further sweeteners in the
GST?
PRIME MINISTER:
Our position is that we're not going to alter its essential thrust
but we'll agree to fine-tuning if that is needed to get it through.
MITCHELL:
Is there still room for further compensation within the package?
PRIME MINISTER:
Well, I'm not using different language than what I've just
employed.
MITCHELL:
Okay, the budget next week - if you were to sum it up, you write the
headline for us, what sort of budget will it be?
PRIME MINISTER:
I think very much a budget about the education future of this country.
I think you'll find quite a bit in it about education.
MITCHELL:
Education. Now, I read in the Financial Review there's
a significant rift in Cabinet about education, about university scholarships,
disadvantaged students being cut back, is that right?
PRIME MINISTER:
Well, I don't talk about Cabinet discussions.
MITCHELL:
Will there be changes to...
PRIME MINISTER:
I'm not going to talk about individual things. You asked me to
try and give it some kind of theme. I think it will be a theme that
will be very good for education and what I might call the future intellectual
capital of this country.
MITCHELL:
There are specific reports about small business getting new incentives
and a mentor system...
PRIME MINISTER:
Well, there are a whole lot of reports and pieces of speculation around
this time. I'm sorry to be difficult. I'd ask the same questions.
I'm just not going to answer them. You invited me to try and
write a headline. I've tried to do that but beyond that I can't
really say any more.
MITCHELL:
Well, let's the follow the headline point a bit - education budget
- conservative, a conservative budget financially or is it a bit (inaudible)
than you have been in the past?
PRIME MINISTER:
Well, we have always brought down fiscally responsible, conservative,
however you want to describe it, budgets, and we'll continue
to do that and Peter has made that very clear.
MITCHELL:
Mr Howard, the refugees, you meet them today, the Kosovar refugees
in Sydney. What will you say to them?
PRIME MINISTER:
Well, essentially what I'll be saying is welcome, we know you've
had a very hard time and we hope we can provide some hope, some relief,
some haven in what must be a horrific part of your lives. I don't
want to say a lot. They'll be very tired. And they'll want
to eat and be looked after and we want to do that.
MITCHELL:
Is there any indication that we will go to 4,000 or in fact beyond
4,000?
PRIME MINISTER:
Well, we're certainly willing to go to 4,000 and as things stand
at the moment we will take 4,000.
MITCHELL:
Okay, more if necessary?
PRIME MINISTER:
Well, at the moment we're committed to taking 4,000. We keep
assessing it. I don't know that we'd go beyond that but
I won't categorically rule it out. You don't categorically
rule out anything but I think 4,000 is a reasonable level given that
the Americans, for example, are taking 20,000 - a very reasonable
level.
MITCHELL:
Reports in The Age today from East Timor people being
herded into sort of indoctrination, pro-Indonesian indoctrination
camps. Do you have any information as to the accuracy of those reports?
PRIME MINISTER:
I don't have anything in front of me about those particular reports
but I know that the situation still remains very difficult. I'm
not pretending that everything has been resolved in East Timor. I
don't think anybody is. But I do know that it's a lot better
than it was a month ago and infinitely better than what it was six
months ago because we do have a very public commitment from the Indonesian
Government to have a ballot. And we do have a process that is more
likely than any other process to ensure that that ballot is free and
open. And Alexander Downer is right to warn, as I have, that we've
got very difficult months ahead of us but we've got to keep a
sense of perspective. If we are to continue successfully influence
the Indonesian Government we must work with them, putting our point
of view very strongly but not waving the finger excessively and pretending
that we can snap our fingers and bring about a change in policy without
exercising sensibly persuasion.
MITCHELL:
We do have to accept though that we might have to take refugees from
East Timor. You look at these photographs today and you think, as
they're departing, the Kosovo refugees arrive, you say, well
inevitably we might have to offer to take refugees from this area.
PRIME MINISTER:
Well Neil, we have a refugee program and once again I don't rule
that out. We'll behave in a humanitarian way as we have in relation
to the people from Kosovo. But the best shot that we can give the
East Timorese is to continue to use our influence, persuade the Indonesian
government to deliver a fair and open ballot. We've been quite
successful in that. Remember that it was submission to the Indonesian
government before Christmas that was the catalyst in bringing about
a change in its policy. The Indonesian brought about a huge change
in policy on East Timor.
JOURNALIST:
We'll take a quick call for Mr Howard then a break. There's
a couple of other things I want to ask about. Well one comes to mind
while we're talking about refugees, is the case of the heavily
pregnant Chinese woman allegedly sent back back to China where she
was aborted. I mean that's not a good sign of a refugee policy
if that happens is it?
PRIME MINISTER:
No. I said yesterday that it certainly offended my instincts, I'm
sure the instincts of most Australians. The claim is being investigated.
I haven't got the results of that so therefore I can't say
anymore other than to assure you and your listeners, and Senator Harradine
who raised the matter, that I'm concerned if it did happen. Very
concerned. Mr Ruddock is as well. And we're finding out if it
did, and why.
JOURNALIST:
Fair enough. But obviously it wouldn't be policy if the bureaucrats.....
PRIME MINISTER:
Certainly not policy, certainly not policy, no. Definitely not policy.
JOURNALIST:
We'll take a quick call and then move on to other matters. Hello
Robert, go ahead please.
CALLER:
Yes good morning. Mr Howard. Thanks for taking my call. Look Mr Howard,
just a quick one on the increase of food prices through the supermarkets
and so forth. Regarding this low inflation, if you spoke to every
household shopper they would swear to you that in the last six months
food has skyrocketed probably anywhere between 10% to 40% increase.
And just on that point, there's also another issue on the LPG
fluctuations. There's anything up to 40% from day to day. Why
is this?
JOURNALIST:
Good question. LPG seems unanswerable.
PRIME MINISTER:
Well, I get a lot of anecdotal reports. Some people say to me that
supermarket prices are going up more than the official figures, some
don't. You've got to remember that our CPI includes a whole
lot of things, they are and not just food prices. The figures can't
be consistently wrong over such a long period of time. And I certainly
don't have the experience of people saying to me between 10%
and 40%. I really don't. I mean that is not my experience, and
can I say a lot of people talk to me about those sorts of things.
Don't think for a moment that I don't talk to people about
those sorts of things. I do on quite a regularly basis. But it's
not my experience to say figures in that magnitude. I think it's
fair to say that people remember price increases more than they remember
something remaining static in price, and they are more conscience
of any price variation in something they buy each day.
JOURNALIST:
But you're happy with the way the basket works, with the CPI
being based on a basket of prices? I get this complaint a lot from
some people who say, well look, inflation's down but our cost
of living is up.
PRIME MINISTER:
Well, a few comments about that. The basket is determined independently
by the statistician and he applies the principles that are applied
all around the world. It keeps getting revised. I have no reason to
question the accuracy of the methodology. And as to things constantly
going up in price, the volume of retail spending is so strong it indicates
that there's a lot of confidence on the part of consumers, and
they have quite a lot of disposable income with which to buy the goods.
And can I also tell you that a very regular thing that is said to
me, very very regularly by people in business, particularly small
business, and that is that the market is very price competitive, that
margins are thin. I was talking to a small printing operator yesterday
in Sydney who I've known for 20 years. I said how's business?
He said, volume terrific, margins wafer thin. And that is a constant
complaint of small business. Now that indicates to me that there's
an enormous amount of competition in the market and that is suppressing
margins. So that tends to support the accuracy of what the statistician
is saying.
JOURNALIST:
Sand what about the LPG prices? We got a lot of reaction to this too.
They are all over the place and without any apparent logic to them?
PRIME MINISTER:
Well I think that is unavoidable when, you know, you have degree of
price competition and you have a degree of flexibility in the market.
JOURNALIST:
A quick call from Oscar. Go ahead please Oscar.
CALLER:
Good morning Mr Mitchell, and Mr Prime Minister. May I talk to you